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On Tuesday I spent the morning at the Ship2B Foundation in Barcelona. Ship2B brings together social change organisations – charities and social enterprises – with grant-making foundations, companies, family offices and venture philanthropists. The social change organisations work on themes in ‘Laboratories’ where the foundations, companies and philanthropists provide advice, contacts and money to accelerate their growth, to ‘scale.’

I sat in on a presentation by the Water4Life lab group. Here were a range of projects on water use and water management. One project was using data from Aigües de Barcelona, the Barcelona water utility, to pinpoint areas of poverty in the city based on how much water each household was using. The project was analysing mass data gathered for one purpose (water supply bills) and using it for another (mapping and understanding poverty).

Which led me to think about the Information Commissioner’s current focus on public domain information collected for one purpose, being used for another.

The ICO have told charities that “publicly available data…is not fair game.” It is not enough to claim that you have a “legitimate interest” in using data from public registers such as Companies House, and news and press reports; you “must balance this against the prejudice to the rights and freedoms of individuals.”

The team at Factary is working hard to ensure we are fully compliant with this new emphasis from the ICO. So this week we contacted one of our suppliers to check that their data was fully compliant. They told us that “…in light of the new GDPR legislation we are currently in discussions…” with suppliers. This is a leading data house that provides data drawn from Companies House. Their end supplier is Companies House.

The Supply Chain

Factary – and any prospect researcher who uses UK companies information from one of the large data houses – is in a supply chain that starts at Companies House. At some point, someone is going to knock on the door of Companies House and ask “are you compliant?”

Before they made their data freely available to anyone, Companies House earned £8.7m in a year, selling it to data users. I have been registered at Companies House as a director since 1990. I have never, ever, had a letter from them asking me if it’s OK to publish my name and address in their register, and then to sell that data on to the big data houses.

I was never asked, because Companies House had a duty in law to gather my personal information and publish it. They turned my private information into public information. They promoted my private information “to power a great range of products” and to encourage “even more people to explore and use [the] data.”

Companies House represents the contradictions at the heart of the legislation that ICO is forced to apply. Data from Companies House that we all believed to be publicly available, and in which we all had a legitimate interest, is no longer “fair game.”

So who is the biggest supplier of publicly available data?

Google, of course.

A Little Light Googling

Every day, millions of people in Britain type the name of a person – a celebrity, a footballer, a friend, a company owner – into Google. Google returns thousands or millions of results; “Theresa May” returns 24 million publicly available results this morning, ranging from press reports to biographic reference sites.

I did not ask the Prime Minister if I might check her name in Google. I am certainly prejudicing her right to privacy by putting her name into Google, because thanks to Google I can see all sorts of scurrilous, unrepeatable stuff about our glorious leader.

Google is a massive re-purposer of publicly available data. Data gathered for one purpose (selling newspapers, or adverts in scurrilous blogs) is re-purposed every single day by Google on behalf of its millions of users.

This is where the contradictions in UK privacy legislation are crystallised. This is where the ICO is heading in its search for the right balance between legitimate interest and the rights and freedoms of individuals.

I want to be a fly on the wall when the ICO knock on the door of number 6, Pancras Square, London N1, the UK headquarters of Google. That battle – between the ICO and Google – will be one to watch.

In one camp are the people who work with philanthropists in charities, universities, theatres and museums. These people know that in order to manage a relationship with a customer – in this case, a philanthropist – we need to do what the banks, the supermarkets, the accountants, lawyers, architects and many others do. We need to be able to access public domain information in order to understand our customer, and we know that we have a legitimate interest in doing so. Sometimes we are required to do this research – for example by our supervisors at the Charity Commission.

Sometimes, we need to do this research before we have met the person. Which is why we have a range of controls, including legal controls and codes of conduct that set limits on this type of research.

In the other camp are the people who believe that precisely this type of research is an intrusion into an individual’s privacy. That searching for a named individual in Companies House fundamentally affects the rights of that person.

This is out of our hands now. The Fundraising Regulator and the Information Commissioner are putting together guidance that – we hope – will resolve this difference.

So we are closing, for now, this thread of conversation. We are not going to take any more comments in this area, for now. The debate needs much more hallowed halls than Factary can offer – it should be taking place in Parliament, or at the NCVO, not in our blog.

We have a job to do – to provide ethically sourced public domain information for our many non-profit clients, and we’d better get back to that.

You are at a board meeting of your charity. Board member Jane mentions her friend Peter, and says he might be interested in making a donation. Peter, she says, is the owner of a large software company.

Peter, to be clear, is NOT A CURRENT DONOR. He has not opted in or opted out or opted for anything at your charity.

Back at the office you put Peter’s name into Google. It’s in your legitimate interests to do so, and Peter would expect you to do this.

Turns out that Peter’s business is based in Newcastle.

You are in London, so there is time and travel cost to consider if you are to visit him. You use Companies House to find out about Peter’s shareholding and the company’s profits. These figures help you estimate Peter’s gift capacity. Again, it’s legitimate for a charity to estimate the size of a potential donation before it decides to spend money on a visit to Newcastle.

At an invitation-only event on the 21st of February, the Information Commissioner’s staff will tell charities and the Fundraising Regulator whether or not they can do this search.

The future of philanthropy in the UK hangs on the ICO’s reply to this one question.

Can a prospect researcher do the search outlined above?

If the answer to the question is “No”, then high-value philanthropy in the UK will change dramatically.

It will no longer be possible to use public-domain information to identify or understand potential donors. Charities, universities, museums, hospitals and theatres will have to stop, immediately, all proactive forms of reaching out to new high-value supporters.

How will high-value philanthropists react? They will give less. When charities stop asking, people of wealth will stop giving, or give less and less often.This is not just an assertion – it is demonstrated by research. In “Richer Lives: why rich people give”, Theresa Lloyd and Beth Breeze report that 69% of rich donors give ‘If I am asked by someone I know and respect.’ Charities, from cancer research to the lifeboats, will have to adapt to a dramatic cut in their income.

Some philanthropists will respond by setting up their own foundations. We know from Factary’s New Trust Update that they are already doing this in some numbers. They will manage their own projects via these foundations, meaning less money for mainstream charities.

If the answer to the question is “No”, then the ICO is taking on not just the charity sector, but pretty much every business in the UK. Because every day hundreds of thousands of secretaries, assistants and marketing people do this exact search to check up on potential customers. Can that really be the ICO’s intent?

If the answer is “Yes”, then the ICO is affirming prospect research. We CAN continue to research, understand, and evaluate potential donors and, with permission, actual donors.

We will know the future of philanthropy in the UK on the 21st of February.

Prospect researchers are at the nexus of a storm between five government agencies. Thanks to the monetary penalties imposed by the Information Commissioner in December 2016 on two leading charities we can now see the extent of the battlefield.

In one corner is the Information Commissioner’s Office, ICO. In its press release announcing fines for the RSPCA and the British Heart Foundation, ICO condemned the use of “information from publically[sic]-available sources to investigate income, property values, lifestyle and even friendship circles.”

This appears to put the ICO in direct opposition to the Charity Commission. In a series of papers entitled ‘The Compliance Toolkit’ the Commission reminds charities that they have a duty to check on donors and potential donors. Tool 6 in the suite is called ‘Know Your Donor’, and here the Charity Commission asks;

“Have any public concerns been raised about the donors or their activities? If so, what was the nature of the concerns and how long ago were they raised? Did the police or a regulator investigate the concerns? What was the outcome?”

How would you find out whether “public concerns” have been raised, if you did not use “publically-available sources”?

You simply have to use newspapers, government sources, and a search engine if you are to find out whether public concerns have been raised. There is no other way. And of course the Charity Commission says so, recommending that “full use should be made of internet websites” to check donors.

Your duty

The Commission goes further, and reminds trustees that “…if the trustees have reasonable cause to suspect that a donation is related to terrorist financing, they are under specific legal duties under the Counter-Terrorism Act to report the matter to the police. In the case of money laundering, reports can be made to the police, a customs officer (HMRC), or an officer of the National Crime Agency.” The Commission suggests a threshold for reporting – donations of £25,000 or more.

But we are not done yet. Because if you have the slightest suspicion that the donor may be a bit iffy, the Charity Commission requires you to “…check the donor against the consolidated lists of financial sanctions targets and proscribed organisations.”

The list contains 8,885 names of individuals who are under sanctions. It includes their date and place of birth, their passport or ID number, and a biographic note such as “Manager of the branch of Syrian Scientific Studies and research Centre.”

That is personal information held in the public domain, that the Charity Commission requires us to review.

The Libya Connection

Why are four government agencies – the Police, HMRC, the National Crime Agency and the Charity Commission – interested in these checks?

In part, the story is linked to the London School of Economics, and the controversy over a gift from Libya. The result of the controversy was the Woolf Inquiry, which published its report in October 2011.

After a detailed study of the history of this gift, Lord Woolf made a series of recommendations on accepting funds from “less well known” high-value philanthropists including an inquiry into the sources of their funds (p. 69) and a thorough due diligence assessment (p. 22).

These searches are only possible with public domain information.

Catch-22

Under questioning at last year’s CASE conference, ICO spokesperson Richard Marbrow did allow that we could use public domain information for due diligence purposes. But he went on to say that this same information could not be used for assessing gift capacity because that would be an “incompatible purpose” for the use of data.

I cannot carry out full due diligence on all my prospects. To do so would be a scandalous waste of charity resources. The Charity Commission suggests that the threshold should be £25,000. So if I am to decide that Mrs A or Mr B must be checked via due diligence…I have to assess their gift capacity.

To do that, I need the help of a fifth government agency, Companies House.

Open for Business

Mr Marbrow cited Companies House various times during 2016, telling fundraisers and prospect researchers that because the information in Companies House was collected for one purpose – regulation – it could not be used for another – prospect research.

“Companies House is to make all of its digital data available free of charge. This will make the UK the first country to establish a truly open register of business information. As a result, it will be easier for businesses and members of the public to research and scrutinise the activities and ownership of companies and connected individuals. … This is a considerable step forward in improving corporate transparency…

It will also open up opportunities for entrepreneurs to come up with innovative ways of using the information.”

So, Companies House wants us to “research and scrutinise the activities and ownership of companies and connected individuals,” and to find “innovative ways of using the information.”

The Battle for Philanthropy

Prospect researchers are caught in the centre of a battlefield between government agencies, between “innovative ways” of using information, terrorism legislation, due diligence and privacy.

We must defend our corner of this bloody battlefield.

We need our friends in fundraising and philanthropy, in Parliament and in civil society, to support the sensible, ethical, managed use of public domain information in the search for philanthropists.

*I am grateful to a colleague at a leading University for pointing this out.

2016 has been my personal annus horribilis, at least in the public domain. (Privately, I’m fine thanks.)

It has been the year when two of my working-life projects have fallen apart.

First, my life as a European was cut off at a stroke by England’s vote for Brexit.

And then as an early Christmas present, the Information Commissioner decided that more or less everything that I had dedicated my working life to doing – understanding philanthropists so that charities could work better with them – was illegal, immoral and subject to multi-thousand pound fines.

The Brexit decision is too political a story for this blog. Suffice it to say that when one choses as a UK citizen to live in another EU country, learn its languages, learn and enjoy its rich cultural traditions, and feel thoroughly welcome as an immigrant, it is physically painful to know that a cabal of alt-right Ministers in Westminster are determined to throw you out.

So let’s focus on the Information Commissioner’s announcement yesterday. We would expect the Commissioner to use cautious language. She does not. She piles right into the topic by claiming that ‘millions of people who give their time and money to benefit good causes will be saddened to learn that their generosity wasn’t enough.’

This is a clear example of evidence-based policy making. The Commissioner has evidence, we assume, that there are ‘millions of people’ who will be saddened that their generosity did not suffice. Given the paucity of information on donors in the UK, it would be so helpful if the Commissioner would share this data with the rest of us.

If the subjects gave their permission, of course.

Given that we are living in an age of austerity in which the ICO’s paymasters in government (of whichever colour) are cutting back on benefits, rights and payments, I would be utterly astonished if there were even ten donors, let alone millions, who would feel that their generosity was enough. It is never enough. Ask any of the homeless people in London if it is enough. Or the 960,000 people living in poverty in Scotland.

The Commissioner then applies the same broad brush approach to what she describes as ‘wealth screening.’ The language is purposefully vague and catches within its apparent scope almost all customer-focused, relationship-building, fundraising. It appears, on one reading of the statement, that it is somehow wrong to use information including ‘supporters’ names and addresses, dates of birth and the value and date of the last donation.’ It appears that to investigate ‘income, property values, lifestyle and even friendship circles,’ may be illegal, along with the ability to model ‘donors most likely to leave money in their wills.’

For me, it’s an Edwardian view of ‘charity.’ It’s a penny in an old man’s hat. Thanks guv’nor. Lord bless your little ones. It is about a one-way relationship, donor to ‘charity.’

There is a load of evidence (yes, actual evidence Commissioner) that this is not how donors want to relate to ‘charities’ (or, as we now call them, non-profits, or Social Purpose Organisations.)

Here is just one of dozens of research reports I could cite; ‘Donors respond to personalised communications from charities that they have a relationship with, and prompts from family, friends or colleagues.’ (source, Bagwell, Sally, Lucy de las Casas, Matt van Poortvliet, and Robb Abercrombie. ‘Money for Good UK: Understanding Donor Motivation and Behaviour’. London: New Philanthropy Capital, March 2013. http://www.thinknpc.org/publications/money-for-good-uk/., page 3).

And yet the Commissioner rails against non-profits that identify ‘friendship circles.’

The Commissioner has, either purposely or unwittingly, threatened the development of high-value philanthropy in the UK. By using this broad language, by focusing on an evidently outdated view of ‘charity’, and above all by fining organisations that are trying to build relationships with their supporters based on mutual understanding and knowledge, she has ensured that UK charities will step back, return to the door-knock and the ‘appeal’, never knowing (because the ICO bans such research) who is behind the door or receiving the letter.

This lack of research will drive a wrecking-ball through relationships between high-value philanthropists and non-profits. It is not coincidental that so many people of wealth are now establishing their own foundations; it is already hard enough to persuade them that they should build a relationship with an existing non-profit.

Confusing, contradictory times, when lawmakers require us to lock-down data whilst revealing their intimate thoughts on Twitter. Times when it is OK for a dominant search engine to track our billions of tiny searches, for our wrist watch to measure and transmit our sleeping and walking in the name of fitness. Times when we choose to tell our life stories in Facebook.

And times when our private underbelly is revealed to the world. Two stories have exposed privacy in all its moral complexity; the Panama Papers, and the Ashley Madison data breach. Both have been stories about activities that are legal (being a director of an offshore company and having an affair, or both simultaneously, are not illegal activities.) Both are about normal immorality.

Both stories are to some degree about power. The Panama Papers show us that the powerful are willing to mix their businesses with drug dealers, dictators and money launderers in order to avoid taxes. If you need to be reminded about just how powerful these people are, bear in mind that just one person was prosecuted out of the 1,000 UK names released in the last big tax-related data breach; the Falciani/HSBC affair [Source: ‘Tax Havens don’t need reform, but abolition’, Richard Brooks, Guardian Weekly, 8/4/16]

Both the Panama Papers and Ashley Madison are about relationships, a subject at the heart of prospect research. John knows Jane because both of them invest in the same company in the British Virgin Islands. And John knows Mary because he signed up for Ashley Madison and she’s his new friend.

John is a donor to your charity. He’s in your database, and he has turned up in a screening (carried out, naturally, by Factary). We’ve spotted him in Companies House, a public domain data set, as a director of an investment firm in Holborn, so we have flagged him as interesting.

When you transferred the data to Factary you took the utmost care over the process, using our sFTP (secure FTP) site and thus ensuring that John’s details were encrypted and safe. You checked that the computer link was over a HTTPS network. You made sure that the data would be stored in servers in the UK, in a physically safe and secured building. You did that because you are a conscientious prospect researcher, using the best practice required by the law.

John did not take the same care. When he invested in the British Virgin Islands via Mossack Fonseca he did so through the open web, by email. He joined Ashley Madison the same way, signing up on their website; no encryption, no security. Worse, he was voluntarily exporting his data outside of the protection offered by the European Union through its Data Directive.

And now John has a photograph of him and Mary together at a work conference and he’s posted it on his Facebook page.

Where is the edge of privacy?

Is it the frontier between long standing public domain records and the new stuff, between Companies House and Facebook, for example?

Is it between voluntarily released information and stuff that is Wikileaked?

Is it between Victorian morality and modern – between a marriage notice in the Telegraph, and Ashley Madison?

Above all, is it where people of power dictate it should be? So that we are allowed to see the company directorships of the little people, but cannot see into the murky world of British Virgin Islands connections? Or into the equally dark corners of political connection and patronage?

This is where we are, like it or not, in prospect research. Prospect researchers live on the edge of privacy, using personal information that is in the public domain, for public good. We research John Doe in order to help our fundraising colleagues reach out to him for a donation that will benefit a poor person, or a scholarship kid, or an eye-opening cultural event.

But the power of research comes with a responsibility; it is our profession that must lead the debates on power and privacy, on public domain and private.

Thank goodness it is us, because prospect researchers have a special moral compass. We have chosen to work for causes we believe in, to make sacrifices (anyone want to talk about pay rates for researchers?) for something we believe to be right and good. We have chosen not to sit in the glory seat in fundraising; we are clearly not in this for vanity or fame. We know the value of information, and we have seen the intimacies and the inanities that people are willing to share on the web. We chose every day between information that is right and relevant, and rubbish.

Prospect researchers are the best placed people in the non-profit sector to describe where a private life becomes public.

But we had better get out there and get talking; our donors, our colleagues and our organisations need our guidance as we walk, together, along the edge of privacy.

The UK has had a strange fundraising summer. It started in May with the suicide of an elderly lady in Bristol. That sparked a tabloid newspaper storm led by the Daily Mail. The newspapers claimed that the lady had jumped to her death as the result of pressure from telephone and direct mail appeals from charities. The inquest held in Bristol in September was told by the family that this was not the case.

But the media were not to be restrained by the mere facts of the case. They continued to ride rough-shod over charities and fundraising. And then the Government – led by the party that had espoused “Big Society” – waded in. In July the House of Commons Public Administration and Constitutional Affairs Committee announced an enquiry into fundraising. NCVO was asked to report, a Fundraising Preference Service was hurriedly assembled and even the normally sanguine Information Commissioner leapt into the fray with new rules on the use of the telephone.

This has not ended yet. There is to be a NCVO Summit on the future of fundraising regulation in December, and we can expect the tabloids to continue their fundraising feeding frenzy as Christmas approaches.

How should prospect researchers react? What is the best we can do for our colleagues and, above all, the people, places or causes we work for?

We know them

We prospect researchers know our donors better than almost anyone else in our organisation. We have spent time learning about their motivations and the stuff they don’t like – their objections. These may include objections to the way we manage our relationship with them. It is time to apply that knowledge answer objections that may have been inflamed by the media firestorm.

Relationship Management

We are members of the team that is managing our relationship with our donor. Right now some of our donors will be feeling a little bruised, so it is more important than ever to engage the skills of prospect researchers in cautious relationship management. Time too to remember a primary skill in research – listening to the donor.

Institutional Memory

Researchers stay longer in post then their fundraising colleagues. So we often become the repository of our organisation’s memory. Old Mrs Smith who does not want to hear ever again from our boss – they fell out 5 years ago. Or John who is having an affair with Peter who is married to Rachel in Accounts. We can’t keep that stuff in a database but we ain’t going to forget it either.

You are a Protocologist

Prospect researchers are above all people of systems. Now is the time to ensure that our systems work… for everyone. Time to review protocols and policies to make sure that they are clear to all of our stakeholders, donors included. We can be proud of our protocols because now – in the difficult moments – is when they really will make a difference, for the good.

Just About Managing

This is a new more challenging fundraising environment. It is a time for critical decisions by management, for the creation of new strategies and new models. Those big decisions have one basic need – information. Who is best placed in the organisation to uncover, analyse and transmit that information?

Yes, the prospect researcher.

Ethical Thinking

Prospect research has always been a place for ethical debate. We have to live in the grey, foggy frontier between the donor and our organisation, a place where personal values, organisational values and sometimes the law can easily be lost. That’s why we have codes of practice, and full, frank debate in our online forums and meetings. We are decent honest people doing good and we are right to question our ethics all of the time. We can apply this careful, thoughtful process of developing ethics to help our colleagues.

Data Guardian

Data rules are probably the slipperiest part of our job. They are not evolving as fast as the Internet, and so the net is full of contradictions. Prospect researchers have a clear guardian duty on behalf of the donors and supporters whose data we hold. Now, when the use of data is being questioned (ironically, by a media that survives by selling personal data…) the steady hand of the prospect research guardian is more vital than ever.

Risk and Reputation Savers

These media and Westminster attacks on our sector represent a risk. Adrian Sargeant, in a paper published this month[1], quantifies that as £2 billion in lost income by 2020. Charity reputations are on the line. These themes of risk and reputation are central to prospect research. We know how to do reputational research. We measure risk whenever we assess a prospect. Now we have to apply those skills to help our own organisations to reduce risk and safeguard reputation.

And Research, Of Course

In these shifting sands – it is not at all clear that there is a policy behind any of these rushed reforms – your colleagues need your research skills more than ever. Not to write another profile – although that as well – but to track what is happening in the sector, in the media, and in the Government so that your organisations can be ahead of the curve. Or at least ahead of the Mail.

In the end this summer’s discontent with fundraising is about trust, as is so much in our non-profit sector. We prospect researchers can rebuild trust one donor at a time by explaining our systems and our methods with honesty and transparency. In the end that transparency and honesty will win over the sensationalism of the press and the knee-jerk tabloid policies of Westminster. Remember that according to Mori[2] research only one person in five trusts a journalist to tell the truth and just one in six trust a politician.

Prospect researchers are central in rebuilding trust in non-profits. We are a central link in the chain between a donor who wants to do good and a beneficiary who needs that help. We’ve got a job to do. Let’s do it.

It must be tough being the Information Commissioner today. This morning’s newspaper will be a crumpled mess on your breakfast table after you read more of the revealing allegations from Edward Snowden. The Government that pays you to keep our private stuff private has also been paying the wages of the spooks at GCHQ who are, apparently, listening in to everything we send or hear.

It’s a classic State job creation scheme; GCHQ dig the holes and you cover them over.

This is all horribly relevant to prospect research, because we researchers live in the legal and moral minefield of personal privacy. Snowden’s allegations change the moral game.

If we are to believe Mr Snowden then the Government has been merrily breaking the spirit of the law. By plugging a USB into the transatlantic fibre-optic cable they are listening to much of what we say and do, most of it private. They must be storing terabytes of personal stuff including an email to my son in the USA about his shopping habits, or the note I sent a friend about her cooking (it was delicious, Martha). In amongst the banalities there will be stuff about race, politics, religion, trades unions, health, sex and crime – the “sensitive personal data” that the European Data Directive has tried to keep properly private. This is all being gathered into the State apparatus for the “greater good.”

Imagine that I were to include a little sensitive personal data in a prospect profile, in contravention of the European Data Directive. For example that a prospect was reported to have had cancer, or malaria, or to have a prosthetic limb. I would be breaking the law, but – given that the State must be collecting this stuff too, could you really, morally, claim, Mr Graham, that I had done wrong?

And then there are the Terrible Twins – Google and Facebook. These two, according to Mr Snowden, have been knowingly handing over to the US Government our search habits, our locations, our friends and our connections.

So if I were to gather some personal stuff about a prospect from her Facebook page and pop it into a profile, could you really, morally claim, Mr Graham, that I had done wrong?

To rub salt in your wounds these companies have been doing this while manipulating our Governments’ tax system in their favour. You, Mr Graham, have been doubly duped. You have (massively) failed to protect our personal data. And your 2012-13 grant-in-aid from the Ministry of Justice was cut…because your paymasters have not been taxing the same Terrible Twins.

The moral justification that allows the State to gather and hold this personal information is the “greater good” of public security; the State collects this data to protect us citizens from the bad guys. A greater good that, if Mr Snowden’s allegations are correct, overrides our laws.

But I have a greater “greater good.” My greater, greater good is to raise the money to feed the starving, to send them to school, to build their hospitals and to show them the beauty of the arts. The greater, greater good of philanthropy.

Does my greater, greater good also override the law?

So if I were to break the law by failing to protect a prospect’s personal data, just as you have failed to protect ours, could you really, morally, claim Mr Graham that I had done wrong?

Prospect researchers protect prospects’ personal information because we are ethical people. We believe that it is right that personal privacy should be protected. We work on the moral and ethical frontier of personal data, taking decisions every day about whether to pass on information to our fundraising colleagues, or to press “Delete.” Yes, the law provides some framework, but it is our moral and ethical belief which provides the foundation.

We will continue to do that – to guard personal information, to respect privacy. But the Snowden allegations have undermined the whole legal framework for data protection. They have made your job impossible.

The Colonel and the College

In December 2008, London School of Economics approached Saif Gaddafi, son of the Libyan leader Colonel Gaddafi, for a donation. On the 23rd June 2009, the governing Council of LSE agreed to accept a gift of £1.5m from a group of companies in Libya, channelled via the Gaddafi International Charity and Development Foundation, controlled by Saif Gaddafi. This story emerged in the media only after the uprising against the Gaddafi regime began, in February 2011.

LSE was attacked in the UK press for having accepted the gift and the controversy grew so severe that by March 2011 the Director of the LSE Sir Howard Davies resigned. The LSE Council later funded an independent enquiry led by Lord Woolf.

As Lord Woolf’s report makes clear, all this was in the historic context that at the time when the gift was being considered, Libya was being seen as a potential friend by the West. The UN Arms Embargo against Libya had been lifted in 2003 and the Bush administration had removed Libya from the list of countries that sponsor terrorism in 2007. The Colonel had been met by Tony Blair in an official visit in 2007; the then Prime Minister saw Gaddafi as a potential ally. In 2009, Libya was seen as eccentric but progressing steadily in the right direction.

But just two years later the Colonel had become a reputational risk for LSE. The School’s reputation had been damaged, and the Director’s neck was on the block.

This story illustrates many of the issues in due diligence and major donors:

The Speed of Change

It shows how fast reputations can change. Your celebrity donor today can tomorrow be vilified because he has been caught, literally, with his pants down. Due diligence today is useful, but it is only of any value if it is a continuous, reviewed process.

Complexity

It shows how hard it is to measure reputational risk where there is complexity. This gift was supposed to come from a consortium of companies, in a country in which little or no corporate transparency exists, channelled via a foundation led by the son of a dictator. Complexity makes due diligence difficult. But major donors often lead complex lives and make gifts via complex structures.

Just what are we measuring?

What, in the case of the Colonel, was LSE supposed to be measuring with its due diligence work? The Colonel’s reputation with the politicians? His son’s reputation? The ways in which his wealth had been accumulated? Clarity in understanding what we are attempting to measure is a key part of due diligence work.

So, what is Due Diligence?

Due diligence is used in the context of “doing a thorough job of checking a prospect.” Up to now most of the focus in due diligence work has been on companies. But fundraisers are now asking for due diligence research on individual philanthropists, wherever there is a concern that reputations or finance could be at stake, or where there is a moral issue to untangle.

What can we check?

1. Is he who he says he is?

At Factary we were asked this recently. A man who said he was a Vicomte had been in contact with the nonprofit and there was talk of a very large gift, possibly into the millions. The nonprofit had started to cultivate the relationship with meetings and social events. The nonprofit’s in-house researcher was suspicious and asked us to carry out a due diligence check. It was difficult because he had covered his tracks well, but eventually we demonstrated that he was definitely not a Vicomte, definitely not French, and that lived in a very small house in Peckham. There were hints that he had done this kind of thing before, although no public reports of convictions. We reported our findings to the nonprofit who stepped away from the relationship.

Proving that a person is the person that they claim to be is difficult – you don’t normally ask potential donors for their passport or ID card – but it’s an essential part of due diligence.

2. Is there money, really?

Does she have the money – a key question for fundraisers – should also form part of a due diligence process, just as it would if you were a business and about to take on a new customer. This means researching wealth and income, shareholdings and properties.

3. The Source of the Money

The origins of the funds to be donated are researchable…in some cases. There are geographic limitations (I have tried, and failed, to identify the source of wealth of certain Russian oligarchs) and there are historic limitations (how far back do you really want to go? The source of her money? Or of her grandmother’s fortune?).

4. Criminal convictions

Due diligence research can reveal criminal convictions where these are recorded in the public domain. But some of this is of limited value. In Spain, for example, a common search will list the overdue parking fines of Spanish citizens – hardly the basis for “reputational risk.”

5. Reputation

This is the slippery, difficult-to-define word of the due diligence researcher. We can research reputation in the press and media (but is that not a very biased source?), we can research the circle of contacts that a prospect moves amongst, and we can ask people-who-know-people for their opinions.

The focus of reputation should be trustworthiness – the perception in the public mind that your organisation can be trusted. Your objective is to maintain and enhance your organisation’s trustworthiness. So reputational risk means; “If we link up with this donor, could this damage the public perception that we can be trusted?”

Can we Check Everything?

There is much about donors that we cannot check. Thankfully, most of us have lives that are private.

We can’t check on money held in banks – it’s private. We mostly can’t check wealth held through private trusts, or wealth held in certain jurisdictions (try the Netherlands Antilles, for example…) We can’t tell whether someone’s secret sexual activities will, tomorrow, be the subject of long-lens photo-“journalism” or of a kiss-and-tell story in the yellow press.

Ethical and Legal

You are simply not allowed to store defamatory material on people. So how are you going to record the (reputational risk-related rumour) that he was a diamond smuggler in his youth?

Nor can you store information on sexuality, health or religion. Any of these could, in some organisations, imply a reputational risk.

Researcher ethics

Those of us in prospect research live with clear ethical guidelines (see the Association of Professional Researchers for Advancement). For me, for example, this means that I am not willing to use private detectives or false “survey calls” to source information on philanthropic prospects. The first is too intrusive and the second is, simply, lying.

Real-Life Issues

In real-life fundraising we face other issues. For example, if the Director General says we should accept the money, what do we do? Do we stick to our agreed due-diligence procedure? Or does the DG’s political power mean that we take the money despite our concerns?

Other organisations question the whole moral basis of this type of research: “We don’t do due diligence on our normal consumer donors, so why do it with strategic or major donors?”

The debate starts here

There are no perfectly satisfactory answers to these questions. But we were in the same place over the issues that arose from starting prospect research 20 years ago.

In time we will together build the protocols and sector norms that we need to enable us to do a good job of being duly diligent. Now, we need the debate.

Factary provides due diligence research for clients. For more information contact Nicola Williams, Research Manager, nicolaw@factary.com